Accrual usage to manage earnings toward financial analysts' forecasts
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This study examines whether management uses discretionary accounting accruals to move earnings upward toward analysts' earnings forecasts when it appears that earnings before discretionary accruals will fall short of the forecast. An earnings shortfall relative to analysts' forecasts could lead management to fear lower compensation and an increase in the likelihood of job termination. The article finds that firms whose earnings before discretionary accruals are below analysts' forecasts use income-increasing discretionary accruals and do so to a greater extent than do firms whose earnings before discretionary accruals are above analysts' forecasts.
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- Accrual usage to manage earnings toward financial analysts' forecasts
Review of Quantitative Finance and Accounting
Volume 7, Issue 3 , pp 259-278
- Cover Date
- Print ISSN
- Online ISSN
- Kluwer Academic Publishers
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- earnings management
- analyst forecasts
- discretionary accruals
- Industry Sectors
- Author Affiliations
- 1. Department of Accounting, Barney School of Business and Public Administration, University of Hartford, 200 Bloomfield Ave., 06117-1599, West Hartford, CT, USA
- 2. Department of Accounting, Graduate School of Business Administration, Fordham University, 113 West 60th Street, 10023, New York, NY, USA